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GIF^T  OF^ 


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http://www.archive.org/details/addressaOOtupprich 


An  Address 


DELIVERED  BY 


WILBUR  S.  TUPPER 

Vice^Presidtnt 
Conservatire  LUc  Insurance  Company 


BEFORE  THE 


COMMERCIAL  CLASSES 


OF  THE 


UNIVERSITY  OF  MICHIGAN 


ANN  ARBOR,  NOVEMBER  13TH,  1902 


An  Address 


DELIVERED  BY 


ANN  ARBOR,  NOVEMBER  13TH,  1902 


!    UNIVERSITY  I 


OF 


£ALifOU\^h> 


M' BRIDE   PRESS     LOS   ANGELES 


An  Address 


DELIVERED  BY 


WILBUR  S.  TUPPER 

Vice-President 
Conservative  Life  Insurance  Company 


BEFORE  THE 


COMMERCIAL  CLASSES 


OF  THE 


UNIVERSITY  OF  MICHIGAN 


ANN  ARBOR,  NOVEMBER  13TH,  1902 


C/^l     ,j;rQO^^\^-i^  M'BRIDK   PRESS     COS   ANQELE8 


\^ 


NOTE :  The  following  address  is 
reproduced  from  the  ^''Insurance  Indi- 
cator'''^ of  Detroit^  which  journal  first 
published  it  from  stenographic  notes 
taken  by  its  representative. 


:153747 


SOME  PRIMARY  PRINCIPLES 

OF 

LIFE  INSURANCE 


Ladies  and  Gentlemen: — Before  begin- 
ning the  talk  which  I  have  in  view,  let  me 
thank  you  first  of  all  for  the  cordial  reception 
which  you  have  given  me.  It  was  not  so 
many  years  ago,  as  it  seems  to  me,  and  still 
it  was  twenty  in  reality,  that  I  myself  climbed 
the  steps  of  the  university  to  begin  my  course; 
and  after  passing  through  similar  courses  to 
those  which  some  of  you  are  now  taking,  I 
think  I  appreciate,  more  than  I  otherwise 
would,  this  reception  and  this  opportunity  of 
speaking  to  college  students. 

From  the  earliest  times,  perhaps  no  one 
fact  has  impressed  itself  upon  the  minds  of 
historians,  poets  and  philosophers,  as  much  as 
the  uncertainty  of  human  life.  It  has  been 
the  subject  of  song  and  story.  Nothing  in 
the  world  is  so  uncertain  and  indefinite  as  the 
after  duration  of  any  mdividuars  life.  It 
may  come  through  disease,  it  may  come 
through  accident ;  it  may  come  in  one  of  vary- 
ing forms,  and  it  often  comes  unannounced 
and  suddenly. 

While  it  is  true  that  nothing  is  so  uncer- 


tain  as  the  duration  of  individual  life,  it  is 
also  true  that  nothing  is  so  absolutely  certain 
as  the  duration  of  community  life.  What  do 
I  mean  by  community  life  ?  I  mean  that,  if 
we  take  a  group  of  individuals  under  the  same 
conditions  and  ages,  leading  the  same  sort  of 
life,  we  shall  find  that  the  after  duration  or 
average  length  of  life  will  be  relatively  the 
same.  Not  only  is  this  true  of  different  local- 
ities, but  it  is  almost  absolutely  true  of  differ- 
ent times.  Thus  the  duration  of  human  life 
today  is  about  the  same  as  it  was  in  the  early 
times  when  the  first  mortality  tables  were 
formed.  And  in  the  main  any  differences 
that  have  been  observed  or  recorded  in  this 
respect  are  due  more  to  increased  data  ob- 
tained and  greater  facilities  for  observation, 
perhaps,  than  to  any  actual  differences  which 
exist. 

Life  insurance  enables  the  individual 
whose  life  is  uncertain  and  likely  to  be  snuffed 
out  at  any  moment  to  partake  of  the  average 
longevity  of  the  race.  In  other  words,  let  us 
assume  that  there  is  one  student  here  of  the 
age  of  30.  He  has  an  expectation  of  life  of 
about  35  years.  This  assumes  that  he  is  the 
average  in  reality  as  well  as  in  theory.  Now, 
by  means  of  life  insurance,  that  life  may  be 
absolutely  insured  so  far  as  the  productive- 
ness of  it  is  concerned.  It  may  share  in  the 
average  productiveness  of  life — an  equivalent, 
in  a  monetary  way,  for  living  the  average  du- 
ration of  life. 

Of  the  various  mortality  tables  which  have 
been  prepared,  I  shall  call  your  attention  to 
two  in  common  use  in  this  country,  and  shall 
not  go  into  details  to  any  great  extent  in 
speaking  of  these.  The  first  is  the  "Com- 
bined Experience"    table  of  mortality,   often 


called  the  ^'Actuaries'."  THis  was  derived 
mainly  from  the  combined  mortality  experi- 
ence of  some  seventeen  English  companies ; 
and  the  results  graduated  and  carefully  tabu- 
lated were  thereafter  used  as  a  basis  of  life  in- 
surance calculation  and  practice.  The  other 
in  use  in  this  country  is  the  so-called  ''Amer- 
ican Experience"  table.  This  was  chiefly  de- 
rived from  the  mortality  statistics  of  one  of 
the  large  American  companies.  But  the 
Combined  or  Actuaries'  table  was  carefully 
used  in  grading  this  and  was  the  general 
basis  for  the  table.  All  of  the  life  insurance 
companies  in  the  United  States,  I  believe,  use 
one  of  these  tables. 

In  your  general  studies  upon  this  subject 
it  will  be  of  interest  to  you  to  look  up  the  par- 
ticular statutes  of  your  own  state.  Remem- 
ber that  the  mortality  table  and  the  rate  of 
interest  are  matters  which  vary  and  which, 
may  be  changed  in  different  states.  I  believe 
that  the  standard  of  the  State  of  Michigan  at 
the  present  time  is  the  American  Experience 
with  4  per  cent,  interest. 

Let  us  say  further  that  no  one  pretends 
that  either  of  these  tables  is  technically  cor- 
rect ;  perhaps  neither  one  is,  nor  is  it  neces- 
sary that  it  should  be.  They  are  both  ap- 
proximately correct;  and  close  enough  to 
actual  experience  to  enable  any  life  insur- 
ance company  to  do  business  safely. 

An  understanding  of  the  elementary  prin- 
ciples of  the  life  insurance  business — the  cal- 
culation of  premiums,  etc.,  may  be  had  with- 
out recourse  to  mathematics  beyond  that 
familiar  to  the  ordinary  high  school  student. 
We  have  to  deal  merely  with  the  force  of 
mortality  and  with  interest  calculations.  I 
will  show  you  in  brief,  in  a  simple  way,  how 


to  compute  a  premium  to  insure  a  life — let  us 
say  of  the  age  of  30.  Let  us  calculate  the 
premium  that  will  insure  $1,000  at  the  age  of 
30  for  one  year,  assuming  the  American  ex- 
perience table  and  4  per  cent,  interest. 

In  the  first  place  we  have  to  consider  not 
merely  the  force  of  mortality  but  also  interest. 
The  calculation  of  premiums  in  life  insurance 
is  upon  the  assumption  that  the  premium  is 
paid  at  the  beginning  of  the  year,  and  the 
benefit  at  the  end  of  the  year  in  which  the  life 
fails.  The  average  death  would,  of  course, 
occur  in  the  middle  of  the  year.  That  would, 
according  to  exact  calculations,  give  the  com- 
pany six  months  to  pay  the  average  claim. 
Some  time  must  be  given  to  examine  proofs 
of  death  and  make  any  investigation  neces- 
sary. As  a  matter  of  fact,  the  practice  is  to 
pay  death  claims  within  30  to  90  days  after 
receipt  of  proofs;  and  some  companies  pay 
claims  immediately  upon  receipt  of  satisfac- 
tory proofs  of  death. 

Now  the  first  proposition  is  this:  What 
is  the  present  value  of  a  dollar,  at  the  rale 
assumed,  due  at  the  end  of  a  year?  It  may 
be  represented  by  the  fraction  t^t  or  .9615, 
the  amount  that  will  at  the  same  rate  of  inter- 
est produce  $1.00  in  two  years  is  ttfxfJf ,  or 
.9245.     Similarly  for  other  periods. 

We  will  start  at  the  age  of  ten,  taking 
100,000  people,  and  note  the  decrement  by 
death  at  the  end  of  each  year.  Now  how 
many  will  be  alive  at  the  age  of  30?  The 
table  says  85,441.  Now  how  many  of  these 
will  die  between  the  age  of  30  and  31,  or  dur- 
ing the  year  for  which  we  are  to  insure  this 
one  life  at  the  age  30?  Can  any  one  in  the 
class  give  the  answer?  As  a  matter  of  fact 
the   table   says    720.     Now  the  fraction  -tHIt 


U; 


represents  the  probability  or  the  chance  that 
a  life  of  the  age  of  30   will  fail   during   that 
year.     Now  if  we  multiply  the  probability  of 
death  during  that  year  by  the  present  value 
of  a  dollar  due  at  the  end  of  that  year,  we 
shall   have   a  result   something   as  follows — 
.0081.     In  other  words  this  .0081   will  insure 
one  dollar  at  the  age  of  30,  to  be  paid  in  case 
the  life  fails  during  that  year,  the  amount  to 
be  paid  at  the  end  of  the  year ;  and  $8.10  will 
insure  $1,000  at  the  beginning  of  the  year  at 
age  30,  the  amount  to  be  paid  in  case  of  death 
at  the  end  of  the  year.     The  figures  given  on 
the  board  insure  the  life  for  one   year  only. 
The  cost  of  insurance,  effected  at  age  30,    to 
insure  the  life  for  age  31,  is  found  by  multi- 
plying the  present  value  of  one  dollar  due  at 
the  end  of  two  years  by  a  fraction  whose  num- 
erator is  the  number  dying  between  ages  31 
and  32,  and  whose  demoninator  is   the  num- 
ber living  at  age  30.     This  amount  paid  at  age 
30  suffices  for  the  insurance  for  the  year  31. 

In  a  similar  way  we  may  compute  the  cost 
of  insuring  at  age  30,  $1,000  for  the  ages  32, 
33,  34,  etc.,  to  the  table  limit.  I  should  have 
explained  earlier  that  we  assume  a  limit  to 
human  life,  at  age  100  in  case  of  the  Actuaries' 
table  and  at  age  96  in  case  of  the  American 
table.  We  must  arbitrarily  cut  the  table  off 
at  some  point. 

Having  computed  the  cost  of  insuring  a 
life  at  ages  30,  31,  32,  etc.,  to  the  table  limit, 
let  us  add  these  costs  together.  We  shall 
then  have  a  single  net  premium  that  will  in- 
sure $1,000  at  age  30,  for  the  whole  of  life. 
You  will  notice  I  have  said  a  single  premium, 
and  I  have  also  called  it  a  net  premium. 

A  single  premium  means  that  the  whole 
cost  is  paid  in  one  sum  in  advance.     Now  that 


is  not  the  way  in  which  life  insurance  protec- 
tion is  ordinarily  obtained.  Men  do  not  effect 
purchases  of  life  insurance  as  they  buy  a  suit 
of  clothes.  What  is  the  process  ?  Instead  of 
paying  a  single  premium  in  advance,  the  ap- 
plicant effects  that  which  in  reality  is  an  ex- 
change or  barter.  It  is  inconvenient,  some- 
times impossible,  for  the  applicant  to  pay 
down  the  full  price  of  protection.  The  life  in- 
surance company  gives  him  a  policy  and  he 
gives  to  the  life  insurance  company,  not  the 
price  of  the  insurance,  but  an  annuity  on  his 
own  life.  Thus  an  exchange  is  made,  and  not 
a  sale  in  the  ordinary  sense. 

Now  to  convert  the  single  net  premium 
paid  in  advance  into  an  annual  net  premium, 
we  may  simply  extend  or  change  the  single 
payment  at  the  beginning  of  the  term  into  an 
equivalent  annuity;  into  annual  payments 
running  through  life  or  for  twenty  years  or 
ten  years  as  the  case  may  be.  Then  we  have 
the  premium  in  the  form  that  it  is  usually 
applied. 

Let  us  assume  that  instead  of  selling  a 
policy  of  life  insurance,  we  want  to  sell  a  pure 
endowment  of  $r,ooo.  I  mean  by  this  that 
$i,ooo  will  be  paid,  say  to  a  man  taking  out 
the  endowment  at  age  50,  if  he  shall  be  alive 
20  years  after.  Nothing  is  to  be  paid  in  case 
of  his  death  during  the  term.  Now  I  will  use 
round  numbers  instead  of  using  the  technical 
figures  of  the  table.  We  may  gain  in  clear- 
ness what  we  lose  in  exactness.  The  princi- 
ple is  the  important  thing.  Roughly,  at  age 
50  about  one-half  will  be  alive  at  the  end  of  20 
years.  We  are  now  selling  a  pure  endow- 
ment to  a  man  at  age  50,  engaging  to  pay 
him  $1,000  if  he  is  alive  20  years  from  today. 
We  are  also  selling  99  other   men,   age   50, 


pure  endowments,  each  a  like  amount  on  like 
terms.  Now  if  all  these  one  hundred  should 
live,  we  must  manifestly  have  on  hand  at  the 
end  of  the  time  $100,000.  But  in  view  of  the 
fact  that  the  table  shows  that  only  half  of 
them  will  be  alive,  we  shall  need  at  the  end  of 
the  term  only  $50,000.  So  if  there  were  no 
such  thing  as  interest  in  this  calculation,  we 
must  observe  the  decrement  by  death  during 
that  period,  and  have  on  hand  at  the  end  of 
the  period  enough  to  pay  each  one  alive  at  the 
end  of  the  time. 

But  there  is  the  interest  calculation.  Let 
us  assume  the  rate  at  3^%.  Now,  how 
much  of  each  dollar  must  we  have  on  hand  so 
that  it  will,  by  compound  interest,  in  20  years 
amount  to  a  full  dollar  ?  We  will  say  again, 
roughly,  about  50  cents.  If  there  were  no 
interest  we  should  need  $500.00  to  be  paid  in 
advance  from  each  man.  In  view  of  the  fact 
that  the  present  value  of  a  dollar  due  at  the 
end  of  twenty  years  is  practically  50  cents,  we 
must  really  have  only  $250.00  from  each  man, 
as  the  price  of  a  pure  endowment  at  age  50  to 
be  paid  20  years  after,  if  the  purchaser  is  then 
alive.  This  is  the  single  premium,  paid  in 
advance,  to  be  changed  into  an  annual  pre- 
mium as  before  explained. 

Now  that  is  a  pure  endowment,  the  pur- 
chaser getting  nothing  in  case  of  death  dur- 
ing the  term  and  receiving  the  endowment 
only  if  he  lives  through  the  period  fixed  in 
the  policy.  Now,  a  life  insurance  endowment 
means  $1,000.00  in  case  of  death  during  the 
term,  and  $1,000.00  in  case  of  survival  to  the 
end  of  the  term.     How  do  we  get  that  ? 

Using  the  illustration  already  on  the  board, 
we  will  now  find  the  cost  of  insurance,  at  any 
age,  not  for  one  year  only,  but  successively  for 


II 


twenty  years.  In  other  words,  the  premium 
that  will  be  sufficient  on  a  basis  of  $1,000.00 
for  all  the  deaths  that  occur  during  20  years, 
according  to  the  table  rate.  We  will  add  to 
that  premium  the  premium  for  pure  endow- 
ment, at  same  age,  as  just  explained,  necessary 
to  pay  a  like  amount  to  those  that  survive  to 
the  end  of  the  term.  By  putting  the  two 
together  we  provide  for  both  those  that  live  to 
the  end  of  the  term,  and  those  that  die  prior 
thereto;  and  that  is  the  method  by  which  a 
regular  life  insurance  endowment  rate  is  calcu- 
lated. 

I  have  used  the  term  net  premium  in  these 
illustrations.  I  mean  by  that  the  exact  insur- 
ance cost,  assuming  the  mortality  and  interest 
rate  to  be  exactly  realized.  We  have  as  yet 
made  no  provision  whatever  for  expenses  of 
administration,  emergencies,  dividends,  so- 
called,  or  anything  of  the  kind.  Now  the 
**  gross,"  or  '*  office  "  premium  is  formed  by 
adding  a  certain  amount  to  the  net  premium, 
which  is  to  cover  expenses  of  management, 
etc.  Now,  in  truth,  this  addition  or  "loading," 
as  it  is  called,  varies  with  the  custom  of  the 
company,  the  style  of  the  policy,  and  the  gen- 
eral conditions  of  the  business. 

Insurance  generally  in  this  country  is 
sold  on  what  is  known  as  the  "participating" 
plan,  with  "dividends"  or  "profits."  Now, 
right  here  let  me  assure  you  that  there  is  no 
such  thing,  according  to  the  usual  meaning 
of  the  term,  as  a  dividend  to  the  insured  in 
life  insurance.  A  dividend  means  profit. 
There  is  no  profit  in  life  insurance.  Life 
insurance  entails  an  absolute  cost  as  does 
everything  of  value.  This  cost  may  be  dis- 
guised or  concealed  in  various  ways.  But  it 
is   there  just  the  same.     What   are  the  so- 


called  dividends  or  profits  of  life  insurance 
companies,  as  respects  the  policy-holder? 
They  are  really  an  abatement  of  the  cost,  the 
proper  return  of  a  proper  overcharge,  consid- 
ered necessary  in  the  premises.  In  other 
words,  we  do  not  know  in  advance  exactly 
what  the  mortality  rate  will  be ;  we  assume 
the  table  rate.  Now,  our  experience  may,  and 
ought  to,  through  medical  selection,  bring  the 
death  rate  below  the  table  rate.  Then  there 
will  be  a  saving  in  mortality,  will  there  not? 
And  that  forms  a  part  of  the  so-called  dividend. 

Again  companies  assume  a  conservative 
rate  of  interest,  say  3  or  3>^2%.  Now,  if  they 
make  more  money  on  their  investments  there 
will  be  excess  interest  earnings.  And  that 
excess  will  contribute  to  the  so-called  dividend. 
This  element  may  be  considered  a  real  earning 
or  profit. 

Again  there  may  be  savings  in  the  admin- 
istration of  the  business  :  this  may  also  be 
added  to  the  dividend  account.  There  may  be 
other  possible  sources  of  dividends,  so-called, 
but  those  outlined  are  the  principal  ones. 

Why  should  life  insurance  be  effected  in  this 
way  ?  If  you  should  go  to  a  tailor  and  ask 
the  price  of  making  a  suit,  he  would  not  say, 
"  We  will  buy  the  cloth,  figure  out  the  cost  of 
making,  and  other  necessary  expenses,  and  add 
them  together ;  you  pay  so  much  down,  and  if 
there  is  anything  left,  after  a  fair  profit,  you 
will  get  it  back."  We  should  consider  such  a 
tailor  a  fit  subject  for  the  insane  asylum.  With 
most  commodities  —  nearly  everything — the 
exact  cost  of  production  can  be  ascertained  and 
is  clearly  known  before  the  sale  is  made.  But 
the  exact  condition  which  shall  exist  during 
the  running  of  a  life  insurance  policy  cannot 
be  known  in  advance.    Hence  we  may  properly 

13 


assume  a  rate  whicli  may  be  greater  tlian  is 
needed  with  proper  return  of  what  shall  be 
saved  out  of  the  appropriation  made. 

There  is  one  company  only  in  the  United 
States  that  sells  all  its  contracts  on  the  non- 
participating  basis,  without  any  return  of  so- 
called  profits  or  surplus.  And  another  very 
great  company  in  this  country  does  nearly  all 
of  its  business  on  this  non-participating  plan. 

Some  one  asks  me  here  what  is  the 
amount  or  percentage  added  to  the  net  pre- 
mium to  jmake  the  gross  or  o£S.ce  premium. 
This  is  a  hard  question  to  answer,  and  one 
depending  upon  the  company  and  kind  of 
policy  contract  considered.  Generally  we 
may  say  that  the  non-participating  policy  is 
loaded  from  the  very  smallest  per  cent,  up  to 
about  15  per  cent.  For  the  participating  rate 
the  loading  on  various  policies  will  run  from 
1S%  up  to  say  40%,  according  to  the  kind  and 
style  of  policy.  Much  difference  exists  among 
companies  not  only  as  to  the  amount  of  load- 
ing but  method  of  applying  it. 

The  two  mortality  tables  referred  to  are 
sufficient  to  insure,  as  a  rule,  all  of  the  adults 
in  any  city  or  state  of  this  country  without 
medical  examination.  Bear  this  in  mind;  it 
is  an  important  principle  and  is  often  over- 
looked. Now  you  know  that  in  order  to  get 
a  policy  you  have  to  do  something  more  than 
simply  make  application ;  you  must  be  exam- 
ined by  the  company's  physician;  a  most  rig- 
orous examination  of  your  life  is  made — at 
some  expense  to  the  company,  too.  Why 
does  the  company  do  that,  if  these  tables  are 
sufficient  to  insure  all  adults  living  in  Michi- 
gan without  medical  examination  ? 

To  explain,  let  us  assume  now  that  com- 
panies have  no  medical  examinations  at  all ; 

14 


who  would  apply  for  insurance?  Not  the 
men  eligible  for  your  football  team;  not  those 
who  have  every  reason  to  expect  to  live  long. 
No;  those  applying  would  be  such  as  know  or 
feel  for  some  reason  that  life  with  them  is  to 
be  short,  If  companies  had  no  medical  ex- 
aminations, only  the  sick,  only  those  certain 
soon  to  die,  or  fearing  that  they  would  soon 
die,  would  apply  for  insurance,  and  we  would 
therefore  not  have  anything  like  the  average 
mortality  rate  as  a  result. 

So  in  the  first  place  companies  examine 
risks  to  guard  against  adverse  selection. 
That  which  an  individual  chooses  in  respect 
to  life  insurance  as  favorable  to  himself,  as 
between  two  courses  of  action  or  two  options, 
— if  it  be  favorable  to  him,  conversely  it  must 
be  adverse  to  the  company.  Therefore  com- 
panies examine  men  in  order  to  guard  first, 
against  this  adverse  selection,  in  order  that 
they  may  not  get  all  the  bad  risks  in  the  com- 
munity, while  the  others  are  entirely  indiffer- 
ent whether  they  insure  their  lives  or  not. 
Furthermore,  examinations  are  made  to  bring 
about  af&rmatively  as  favorable  a  selection  as 
possible. 

Again,  if  we  could  secure  average  lives  en 
bloc  without  the  cost  of  medical  examination, 
the  results  would  be  fully  as  favorable,  from 
a  practical  financial  standpoint,  as  they  are  by 
selecting  risks,  with  the  cost  of  medical  exam- 
ination. To  secure  average  lives  e7t  bloc,  is 
impracticable,  therefore  medical  examination 
is  not  only  desirable  but  absolutely  necessary. 
I  can  illustrate  adverse  selection  in  another 
way.  We  have  various  kinds  of  policies ; 
cheap  term  policies,  ordinary  life  policies  and 
endowment  policies.  Now  in  the  practical 
operation  of  the  company,  in  spite  of  medical 

15 


examination,  we  find  a  Higher  death-rate 
among  those  who  apply  for  cheap  term  poli- 
cies. Why?  Simply  because  those  who  are 
applying  for  low-priced  term  policies  are  do- 
ing it  because  they  feel  that  there  is  some 
reason  for  thinking  that  they  will  die  before 
the  end  of  the  term.  On  the  other  hand, 
those  who  are  taking  out  high-priced  endow- 
ment policies  are  better  risks  than  the  ordi- 
nary life  insurers,  simply  because  they  feel 
pretty  certain  that  they  will  live  out  the  term 
of  the  policy  and  receive  the  endowment. 
Otherwise  they  would  not  have  applied  for  the 
endowments. 

In  connection  with  this  topic,  let  me  call 
your  attention  to  a  very  important  fact  in 
regard  to  mortality  among  women.  The  Brit- 
ish government  has  for  many  years  sold  an- 
nuities on  the  lives  of  men  and  women. 
Many  years  ago  a  number  of  Dutch  investors 
made  large  investments  by  buying  annuities 
on  the  lives  of  healthy  young  women.  Long 
before  the  death  of  all  of  these,  they  had 
demonstrated  that  women  live  longer  than 
men;  that  they  are  poorer  risks  for  the 
grantor  of  the  annuity ;  hence  the  Dutch  in- 
vestors made  a  very  large  profit.  Now  this 
was  about  the  beginning  of  an  investigation 
in  regard  to  mortality  as  between  the  sexes. 
And  the  finding  of  the  Dutch  investors  has 
been  repeatedly  confirmed  since;  that,  in  adult 
life  at  least,  women  live  longer  than  men. 
What  was  the  result  of  this?  Shortly  after- 
wards a  couple  of  companies  organized  in 
London  for  the  special  purpose  of  insuring  the 
lives  of  women.  These  two  companies  took 
women  very  readily  and  freely.  Both  these 
companies  became  bankrupt,  because  the  mor- 
tality   among    women    was    so    great!     The 

i6 


Dutcli  investors  found  that  tlie  women  were 
better  as  annuitants  and  lived  longer ;  and  tlie 
two  life  insurance  companies  failed,  because 
of  tbe  greater  deatb-rate  among  women.  Now 
that  is  one  of  tbe  greatest  apparent  paradoxes 
tbat  could  possibly  be  observed.  And  from 
tbat  day  down  to  this  some  companies,  and 
some  American  companies,  too,  have  charged 
women  more  for  annuities,  because  they  are 
supposed  to  live  longer,  and  more  for  life  in- 
surance because  they  are  supposed  not  to  live 
so  long.  What  resolutions  do  you  think  a 
woman's  rights  organization  would  pass  rela- 
tive to  this  ? 

What  is  still  more  remarkable  is  the  fact 
that  both  these  courses  were  entirely  logical. 
Why  ?  On  account  of  adverse  selection  again. 
They  did  not  get  a  fair  selection  from  these 
risks  on  women.  Women  were,  and  still  are, 
occasional  insurers,  not  average  insurers. 
They  are  not  hunted  out  by  agents  and  fairly 
dragged  by  the  neck  into  insuring  their  lives, 
as  men  are.  And  in  consequence  such  women 
as  insure  their  lives  are  the  occasional  ones 
who  seek  insurance,  or  are  willing  listeners, 
because  they  know  or  feel  that  there  is  some 
reason  why  their  lives  should  be  protected. 
And  therefore  a  higher  death  rate  among 
female  risks,  as  a  whole,  may  be  expected. 
Only  when  female  risks  are  sought  as  vigor- 
ously as  men  are,  can  you  get  a  mortality  rate 
as  favorable  as  on  the  lives  of  men.  Another 
contributary  cause  to  a  higher  death  rate 
among  female  risks  is  woman's  traditional 
privilege  of  concealing  anything  about  her  past 
history  or  present  condition.  Fair  examina- 
tions are  not  so  easily  obtained. 

Adverse  selection  will  be  felt  when  a  policy- 
holder chooses  an  option.     Assume  that  a  man 

17 


insures  at  age  30,  gets  a  so-payment  life 
policy  of  $1,000  and  lives  to  be  50.  Let  us 
say  that  he  has  a  reserve,  or  cash  credit,  of 
$500.  Now  at  50  the  policy  is  fully  paid  up 
for  life;  he  may  take  that  and  have  no  more  to 
pay  on  it,  or  he  may  have  his  cash  reserve,  or 
credit,  of  $500.  He  cannot  have  both.  Now 
the  death  rate  jumps  up  at  this  point  and  then 
slowly  goes  down  again.  Why?  Because  all 
those  who  feel  that  death  is  near  are  going  to 
take  the  policy  and  let  it  run  ;  while  all  those 
who  are  healthy  and  feel  they  are  going  to  live, 
will  take  the  $500.  Thus  through  adverse 
selection  the  poorer  risks,  as  a  rule,  remain 
with  the  company. 

I  see  my  time  is  going  rapidly  and  I  shall 
not  have  time  to  more  than  touch  upon  other 
interesting  branches  of  the  subject.  Just  a  word 
as  to  investments.  In  the  first  place,  you  must 
bear  this  in  mind  :  Make  all  of  your  investiga- 
tions in  life  insurance  investments  start  with 
the  statutes  of  the  State.  The  life  insurance 
corporation  is  a  creature  of  the  statute,  and  of 
course  derives  all  its  powers  and  privileges 
from  the  laws  of  the  State.  It  must  therefore 
make  all  its  investments  along  certain  lines 
which  the  statutes  permit. 

From  State  supervision  of  investments 
there  are  good  results  and  bad  results.  The 
good  results  are  that  a  general  rule  of  this  kind 
will  keep  some  companies,  possibly,  from  stray- 
ing beyond  bounds,  and  thus  compel  them  to 
invest  the  people's  money  more  safely.  The 
bad  results  are  that,  as  the  rules  must  be  gen- 
eral in  their  application,  they  restrict  a  com- 
pany from  some  profitable  investments  which 
otherwise  probably  might  be  made.  Some 
statutory  provisions  in  regard  to  investments 
are  '^  survivals,"  not  adapted  in  all  respects  to 

18 


tHe  changed  conditions  of  the  present  time. 

Among  investments  generally  permitted 
yon  will  find  United  States  bonds,  the  bonds 
of  the  state  and  the  bonds  of  the  municipal 
corporations  of  the  state,  and  sometimes  those 
of  other  states  and  municipalities.  Likewise 
bonds  of  certain  corporations  under  conditions 
specified  in  the  statute.  You  will  always  find 
real  estate  mortgages,  under  certain  condi- 
tions, generally  that  they  must  be  first  mort- 
gages on  improved  property,  and  for  not  ex- 
ceeding one-half  the  value  of  the  property. 
See  the  statutes  of  Michigan  for  the  require- 
ments in  your  own  state. 

Now  right  here  I  want  to  call  your  atten- 
tion to  what  seems  to  me  a  singular  fallacy  or 
mistaken  notion  in  regard  to  real  estate  mort- 
gages as  life  insurance  investments.  The  com- 
mon assumption  is  that  no  investment  can  be 
better  for  a  life  insurance  company  than  mort- 
gages on  real  estate.  You  recall  what  I  said 
about  adverse  selection  in  the  matter  of  risks. 
Now  let  us  see  how  adverse  selection  operates 
here. 

Let  me  represent  this  graphically  on  the 
blackboard  as  follows  :  Let  the  space  between 
these  two  lines,  say  about  a  foot  apart  across 
the  board,  represent  the  value  of  mortgaged 
real  estate.  Draw  a  line  halfway  between  these 
two  lines,  and  let  the  space  between  this  and 
the  lower  line  represent  the  mortgage  or  the 
money  loaned.  Now  these  real  estate  mort- 
gages are  in  various  parts  of  the  country.  In 
Detroit,  in  Minneapolis,  in  Omaha,  in  Denver, 
in  Los  Angeles.  In  the  course  of  time  there 
will  come  depressions  in  real  estate  in  some 
places.  There  will  be  a  wave  of  depression 
running  along,  striking  the  middle  lines  from 
above  in  some  places.    Now  what  is  the  result? 

19 


Wherever  the  actual  value  comes  more  thau 
half  way  down,  touches  or  goes  below  this 
middle  line,  the  real  estate  becomes  worth  less 
than  the  mortgage,  and  the  mortgagor  is  going 
to  let  it  go,  and  the  property  goes  to  the  com- 
pany. It  will  be  to  the  interest  of  the  mortga- 
gor to  let  it  go.  Hence  the  companies  will 
gradually  accumulate,  never  the  best,  but 
always  the  least  desirable  pieces  of  property. 

Again,  when  the  company  gets  this  mort- 
gaged real  estate,  it  is  usually,  or  should  be, 
improved  property;  and  this  is  a  constant 
source  of  annoyance  and  expense.  Wherever 
depreciation  in  values — as  upon  the  collapse 
of  a  boom — has  left  property  worth  less  than 
the  mortgage,  the  company  acquiring  it  must 
run  a  regular  real  estate  and  rental  business  in 
addition  to  the  many  cares  of  insurance  busi- 
ness proper.  The  foreclosed  property  requires 
improvements,  repairs,  and  care  generally.  I 
believe  I  am  safe  in  the  assertion  that  as  be- 
tween good  bonds  and  real  estate  mortgages, 
generally,  there  should  be  a  difference  of  one- 
half  of  \%  to  make  up  for  the  adverse  selec- 
tion which  is  sure  to  go  on,  as  the  company 
will  inevitably  acquire  the  most  undesirable 
pieces  of  real  estate. 

A  company  should  be  as  free  as  possible 
to  energize  along  lines  of  its  own  appropriate 
business, — which  is  the  insuring  of  lives. 

Some  companies,  especially  in  earlier 
years,  have  been  conspicuously  successful 
with  real  estate  investments.  In  general  the 
worst  feature  today  of  many  an  excellent 
company's  statement  is  the  item  of  depre- 
ciated and  unproductive  real  estate,  acquired 
under  foreclosure.  One  company  in  particu- 
lar, scrupulously  rigorous  in  what  it  deems 
correct  insurance  methods,  has,  through  this 


20 


process  of  adverse  selection,  been  compelled  to 
own  enough  real  estate  in  tHe  Mississippi 
Valley  to  abundantly  confirm  this  principle. 
And  there  are  others. 

In  respect  to  investments  there  are  some 
differences  to  be  observed  between  the  older 
and  larger  companies  and  the  younger  and 
smaller  ones.  A  very  large  company  will 
have  the  advantage  which  goes  with  a  large 
volume  of  money.  It  can  take  advantage  of 
financial  opportunities,  and  can  measurably 
control,  or  at  least  affect,  the  market.  The 
cumulative  force  of  capital  is  in  its  favor. 
On  the  other  hand,  the  young  company  will 
not  have  among  its  assets  foreclosed  mort- 
gages, unproductive  real  estate  or  depreciated 
bonds.  Furthermore,  the  small  company  is 
able  to  invest  its  hundred  thousands  or  its 
one  million  of  income  obviously  more  profit- 
ably than  will  be  possible  with  an  income  of 
sixty  millions,  and  generally  can  better  per- 
sonally investigate  securities.  This  whole 
subject  of  life  insurance  investments  is  a  very 
interesting  one,  and  one  which  I  commend  to 
you  for  further  investigation. 

In  the  few  minutes  that  remain  I  want  to 
call  your  attention  to  a  broader  and  deeper 
meaning  of  life  insurance  than  is  usually  im- 
plied by  that  term. 

Life  insurance  rests  on  the  same  basis  as 
fire  insurance.  While  life  is  precious,  viewed 
in  the  light  of  sentiment,  it  is  the  financial 
value  of  a  life  which  is  really  insured. 
Human  life  is  insured  for  the  same  reason 
as  a  building,  and  for  that  reason  only.  Now 
let  me  call  your  attention  to  a  singular 
anomaly :  Suppose  that  a  building  or  furniture 
has  been  insured,  and  is  by  fire  partly  destroyed. 
That  partial  loss  would  be  paid  of  course,  be- 


cause  the  insurance  company  insures  for 
whatever  loss  may  occur  to  the  property  by 
fire,  within  the  amount  of  the  policy  and  the 
value  of  the  property.  Now,  remembering 
that  it  is  the  productive  energy  of  human  life 
that  is  insured,  what  shall  we  say  of  a  partial 
loss  of  life  through  accident  or  disease? 

Insurance  against  accident  and  insurance 
against  disease  are  well  recognized  branches 
of  the  business ;  but  they  have  been  hereto- 
fore looked  upon  as  something  distinct  and 
apart  from  life  insurance.  As  a  matter  of 
fact  J  they  are  both  life  insurance  in  the  full 
sense  of  the  term^  as  much  as  the  insurance 
which  protects  your  building  against  a  partial 
loss  is  fire  insurance^  equally  with  that  which 
protects  it  from  a  total  loss. 

Life  insurance  policies  are  now  being  de- 
vised which  shall  protect  life  fully  and  com- 
pletely and  pay  the  partial  loss  as  well  as  the 
total  loss  of  life.  And  in  one  contract,  also. 
Those  who  need  insurance  most  to  protect 
their  families  in  case  of  death,  are  generally 
those  who  can  least  afford  the  loss  of  the  pro- 
ductive energy  of  life,  when  that  loss  is 
brought  about  by  accident  or  disease.  Insur- 
ance that  protects  life  against  a  partial  loss 
appeals  strongly  to  the  human  mind  and  the 
human  heart;  because  man  is  essentially  sel- 
fish. Justly,  on  high  moral  grounds,  insur- 
ance against  the  partial  loss  should  appeal 
with  great  force,  to  the  insurer  who  is  a  pro- 
ducer or  wage  earner.  If  he  does  not  protect 
himself  and  his  own  earning  capacity,  how 
can  he  hope  to  be  able  to  pay  a  premium  that 
shall  protect  his  wife  and  children,  should  he 
for  any  reason  lose  that  earning  capacity  ? 

I  call  this  to  your  attention  as  one  of  the 
latest,  and,  to   my   mind,   one  of  the  greatest 


22 


developments  of  life  insurance;  a  contract 
wHicli  protects  tlie  family  of  tlie  insurer  in 
case  of  death ;  whicli  protects  him  in  case  Hs 
life  suffers  an  infraction  by  sickness  or  by  ac- 
cident. This  is  life  insurance  in  its  most 
complete  and  perfect  form. 

Even  as  mortality  tables  have  been  pre- 
pared, indicating  what  the  death  rate  is,  as  a 
basis  for  proper  rates  insuring  against  death, 
so  do  we  have  tables  that  indicate  the  cost  of 
insurance  against  accident  and  insurance 
against  disease,  which  are  partial  or  tempo- 
rary losses  of  life. 

Now,  in  conclusion,  as  the  hour  closes,  let 
me  say  that  I  have  been  able  merely  to  call 
your  attention  to  points  in  outline  without 
stopping  to  develop  them.  I  trust  that  this 
talk  will  add  to  your  interest  and  lead  you  to 
study  further  this  great  subject  which  is  such 
a  mighty  force  today  in  the  commercial  and 
industrial  world. 

Ladies  and  gentlemen,  I  thank  you  very 
much  for  your  interest  and  your  attention. 


23 


A  PROFESSION  FOR 
YOUNG  MEN 


AN  ADDRESS 

Delivered  by 

WILBUR  S.  TUPPER 

Vice-President 
CONSERVATIVE  LIFE  INSURANCE  COMPANY 

Before  the 

LIFE  INSURANCE  CLASSES 

of  the 

UNIVERSITY  OF  MICHIGAN 

ANN  ARBOR,  May  12,  1904 


31/ 


f    UMivrnriTY  of  CALifcnfiiA 

^^■'    9  1905   ■ 
PRESIDENTS  OFFICE 


An  Address 


Delhered  By 


WILBUR  S.  TUPPER 

Vice-President 
CONSERVATIVE  LIFE  INSURANCE  COMPANY 


Before  the 

Commercial  Classes 

of  the 

UNIVERSITY  OF  MICHIGAN 

ANN  ARBOR.  May  12, 1^04 


FORM   479  CIM   6  04 
FRED   8.  LANG  PRESS,    LOS  ANQELE8 


NO  TE :  The  following  address  is 
reproduced  from  the  ''Insurance  Indi- 
cator'' of  Detroit,  which  journal  first 
published  it  from  stenographic  notes 
taken  by  its  representative. 


Life  Insurance  Field  Work — A 
Profession  for  Young  Men. 


Ladies  and  Gentlemen:  It  was  my  privilege  to 
address  the  students  in  this  University  upon  Hfe 
insurance  about  one  and  one-half  years  ago.  At 
that  time  I  had  something  to  say  about  the  ele- 
mentary principles  of  life  insurance, — the  science 
and  theory  of  it.  Today  it  is  my  business  to  tell 
you  something  about  the  practical  part  of  life  in- 
surance, the  most  practical  part;  the  getting  of 
applications  in  the  field — the  profession  of  life 
underwriting. 

Life  insurance  is  not  only  the  greatest  business 
in  the  world,  but  it  is  also  the  greatest  profession 
in  the  world.  It  is  not  merely  a  business  which 
deals  with  capital  and  has  an  influence  industri- 
ally and  commercially,  but  it  is  a  profession  as 
surely  as  any  of  the  so-called  learned  professions 
are  today.  Now,  while  it  is  generally  understood 
and  conceded  that  the  insurance  business,  actuar- 
ial, medical  and  legal,  is  professional,  it  has  not 
been  always  well  understood  that  life  underwrit- 
ing in  the  field  is  a  profession. 

It  is  needless  for  me  to  speak  of  the  dignity  and 
the  value  of  life  insurance.  I  think  even  the  great 
mass  of  people,  let  alone  students  at  a  State  Uni- 
versity, appreciate  this.  If  there  is  anything  I 
hear  with  great  regret,  it  is  an  apology  for  the 
profession  of  life  underwriting  in  the  field.  In 
worth,  dignity  and  value,  it  is  not  surpassed  by 
any  other  profession. 

In  this  great  profession,  ladies  and  gentlemen, 

3 


(and  ladies  will  also  find  profitable  employment 
here)  you  will  not  find  too  much  competition.  If 
there  is  a  life  insurance  field  man  here  he  will 
surely  smile  at  this.  The  great  poet  said:  "All 
the  gates  are  thronged  with  suitors ;  all  the  mar- 
kets overflow."  But  in  life  insurance  there  is 
room  enough  for  all  who  will  take  it  up.  Let  me 
illustrate. 

If  there  were  but  one  dry  goods  house  in  the 
city  of  Ann  Arbor  or  Detroit,  that  house  would 
do  a  wonderful  business;  but  if  there  were  only 
one  life  insurance  man  in  the  city  of  Ann  Arbor 
or  Detroit,  his  business  would  suflfer.  In  the  dry 
goods  business  there  is  in  the  first  instance,  a  de- 
mand on  the  part  of  the  public.  Let  us  assume 
that  this  city  can  support  a  certain  number  of  dry 
goods  houses;  then  double  that  number.  The 
business  must  be  divided.  But  in  life  insurance  it 
is  not  so.  Every  man  in  the  field  can  get  only  the 
business  that  he  works  up  for  himself.  It  makes 
no  difference  if  there  are  twenty  others  in  the 
same  city  doing  the  same  business.  The  one  life 
insurance  man  in  the  city  of  Detroit  would  find  it 
hard  getting  business.  The  people  would  not  be 
educated  and  aroused,  and  he  would  find  the  task 
difficult.  The  life  insurance  man  must  first  create 
the  demand  and  then  fill  it.  Therefore,  in  taking 
up  life  insurance  field  work,  you  are  not  restricted 
by  competition.  Furthermore,  there  is  a  larger 
demand  for  your  labor  in  life  insurance  field  work 
than  in  any  other  trade  or  occupation.  Every  day, 
from  the  companies  of  the  United  States,  there 
comes  up  a  Macedonian  cry  addressed  to  young 
men,  "Come  over  and  help  us.''  That  condition 
of  affairs  does  not  exist  in  any  other  profession. 
Here  there  is  abundant  room. 

However,  before  deciding  to  take  up  this  work, 
I  advise  you  to  consider  first  whether  you  are 

4 


adapted  to  the  business.  Now,  it  is  true  to  some 
extent  that  almost  anyone  can,  in  some  measure, 
do  almost  any  kind  of  work.  But  it  is  true  in  a 
still  greater  rneasure  that  he  who  is  naturally 
adapted  to  a  certain  line  of  work  or  profession, 
will  succeed  best  in  it;  and  this  is  especially  true 
of  life  insurance  field  work. 

I  would  not,  as  has  sometimes  been  done,  urge 
everyone  to  enter  life  insurance  field  work.  I 
would  say  first,  apply  two  tests  to  yourselves.  If 
you  have  two  qualifications  which  I  shall  name, 
you  may  make  a  success  in  field  work.  If  you 
have  them  not,  you  are  bound  to  fail.  The  first  is 
initiative,  the  power  of  self-direction,  the  faculty 
of  self-control,  the  ability  to  order  business  for 
yourself,  and  your  own  action  in  relation  to  that 
business. 

Every  young  man  and  woman  in  this  room  is 
capable  of  working  for  some  one  else.  Everyone 
here  can  come  down  to  an  office  and  sit  at  a  desk 
from  morning  until  the  luncheon  hour,  and  then 
again  until  night,  and  do  so  day  after  day,  week 
after  week  and  year  after  year. 

Only  part  of  the  people  in  this  world  can  work 
for  themselves.  It  is  from  this  part  that  life  in- 
surance field  men  must  be  chosen.  Why  ?  When 
you  work  for  yourself  nobody  maps  out  your 
work  for  you  and  says,  Do  this  or  do  that.  That 
is  all  left  to  yourself.  That  is  why,  when  working 
for  yourself,  you  must  have  initiative,  or  the  abil- 
ity to  guide  yourself.  The  life  insurance  man  who 
comes  out  of  his  office  in  the  morning,  and  looks 
first  up  and  then  down  the  street,  with  his  hands 
in  his  pockets,  wondering  whether  he  will  go  one 
way  or  the  other,  is  not  a  life  insurance  man  at 
all,  although  he  may  be  trying  to  do  the  business. 
He  should  know  at  once  where  to  go,  and  whom 
to  see.    When  he  stops,  and  hesitates  and  won- 


ders,  that  is  a  true  sign  that  he  is  not  a  Hfe  in- 
surance man.     Initiative  you  must  have. 

Again,  you  must  have  industry  or  you  cannot 
succeed  in  Hfe  insurance  field  work.  It  is  a  re- 
markable fact,  but  true,  that  people  inclined  to  be 
indolent  will  indulge  themselves  when  working 
for  self,  but  not  when  working  for  others.  The 
lazy  man  will,  if  he  has  any  scruples  at  all,  work 
because  he  is  earning  a  salary.  He  does  not  want 
to  take  his  employer's  wages  without  giving 
something  in  return.  If  he  were  not  drawing  a 
salary,  he  might  not  do  the  work  at  all.  If  any 'of 
you  take  up  life  insurance  work,  just  apply  these 
tests  to  yourselves.  You  must  be  industrious. 
Young  ladies  and  gentlemen,  this  is  a  cardinal 
virtue  not  to  be  overlooked.  The  Germans  have 
a  proverb,  'Tet  no  man  boast  save  of  his  in- 
dustry." If  you  have  genius,  it  has  been  born 
with  you.  But  the  application  of  your  talents  to 
the  everyday  work  of  life  rests  with  you;  and  if 
you  are  not  industrious,  you  are  not  worthy  of 
success. 

So  you  must  have,  I  say  broadly,  initiative  and 
industry.  You  ought  to  have,  and  most  of  you 
will  have,  other  qualifications,  which  I  may  call 
the  graces  or  the  accomplishments  of  the  busi- 
ness. You  should  be  essentially  frank  and  sin- 
cere. You  should  have  a  good  address.  You 
should  be  diplomatic.  Diplomacy  will  win  more 
victories  than  force.  And  you  must  be  persistent. 
All  of  these  will  determine  the  character  and  the 
measure  of  your  success;  but  without  industry 
and  initiative  you  will  never  succeed  at  all. 

As  I  said  before,  not  everyone  carrying  a  rate 
book  is  the  ideal  insurance  man.  Many  a  man 
selling  life  insurance  to-day  ought  to  be  keeping 
books.     Why?     Because  he  needs  something  as 

6 


a  spur  to  industry;  he  must  keep  busy,  or  his 
work  will  get  ahead  of  him.  Many  a  man  selling 
life  insurance  today  ought  to  be  behind  the  coun- 
ter selling  ribbons  and  silks.  Why?  Because  in 
that  business  he  does  not  need  initiative ;  the  peo- 
ple will  come  to  him. 

With  these  as  prerequisites  I  want  to  call  your 
attention  to  some  of  the  great  advantages  offered 
by  this  magnificent  profession.  I  take  it  that  the 
first  and  greatest  is,  that  it  enables  the  field  man 
to  take  that  financial  position  which  his  ability 
and  ambition  entitles  him  to  assume.  Ladies  and 
gentlemen,  this  is  not  true  of  any  other  business 
or  profession  in  the  world,  absolutely  not. 

Let  me  give  you  an  illustration.  Here  is  a 
young  physician  who  has  started  out  to  practice. 
He  has  all  the  qualifications  of  the  older  man  who 
has  worked  in  the  city  for  the  last  two  genera- 
tions. He  has  to  wait  for  the  world  to  come  and 
find  him.  He  cannot  attract  many  patients  until 
he  has  proved  his  skill;  and  he  cannot  prove  his 
skill  until  he  has  patients  to  practice  upon.  The 
young  lawyer  may  be  just  as  well  qualified  as 
some  of  the  older  men  who  have  been  in  the  city 
for  years ;  but  his  shingle  swings  in  the  wind,  and 
as  best  he  may,  he  practices  law  and  economy, 
while  he  is  waiting  for  a  large  practice  to  come  to 
him. 

Take  the  man  who  is  working  on  a  salary — say 
$ioo  per  month.  Now,  really,  is  this  man  worth 
$90  or  $125  per  month  ?  No  one  knows.  He  may 
earn  more  one  month  than  in  another,  but  he  gets 
the  $100  just  the  same. 

I  believe  that  all  men  who  work  on  a  salary,  as 
a  rule,  get  less  than  they  are  really  worth.  Nat- 
urally the  employer  has  a  little  more  to  say  in  re- 
gard to  the  wages  than  the  employee,  and  that 
being  the  case  the  salary  is  apt  to  be  a  trifle  too 

7 


low  rather  than  too  high.  But  in  Hfe  insurance 
field  work  you  get  the  returns  that  you  are  entitled 
to.  Therefore,  this  is  a  great  profession  for  the 
young  man  of  ability  and  ambition,  because 
every  young  man  wants  the  pay  he  is  entitled  to. 
How  is  this?  It  is  as  follows:  Life  insur- 
ance field  work  may  be  likened  to  a  great 
field  of  "pay  dirt"  in  which  there  are  shin- 
ing particles  of  gold.  We  provide  facilities 
and  equipment,  and  you  wash  out  and  bring 
in  the  gold  and  we  divide  it  with  you  in  a 
certain  ratio.  When  the  week,  month  or  year 
is  done,  it  will  show  exactly  what  you  are  entitled 
to.  You  get  what  you  earn.  If  there  were  but 
this  one  great  advantage — exact  and  just  return 
for  your  labor — it  should  appeal  to  you  with  great 
force.  The  ambitious  man  demands  all  he  earns ; 
the  honest  man  will  not  take  more. 

Another  advantage  in  favor  of  this  great  pro- 
fession is  the  fact  that  you  are  free  in  your  ter- 
ritorial movements.  You  may  practice  the  life 
insurance  profession  in  Ann  Arbor,  Detroit,  Chi- 
cago or  Los  Angeles,  and  you  do  not  depend  upon 
the  environment  of  the  place  for  your  success. 

This  is  not  the  case  with  the  doctor  and  lawyer. 
When  he  has  been  twenty  years  in  one  place,  for 
business  or  climatic  reasons,  he  may  be  obliged 
to  move  elsewhere.  Do  you  think  the  patronage 
which  he  has  built  up  will  follow  him?  One  of 
the  unfortunate  things  about  the  moving  of  an 
elderly  professional  man  is  that  he  must  work  his 
way  up  to  the  front  again,  as  though  just  out  of 
college.  Of  course  he  has  the  benefit  of  his  past 
experience;  but  what  good  does  that  do  him,  if 
the  people  about  him  know  nothing  about  it  ?  In 
Los  Angeles,  where  our  Home  Office  is  situated, 
we  see  many  of  this  class  who  have  been  obliged 
to  change  location  on  account  of  climate. 


The  life  insurance  man  can  carry  on  his  pro- 
fession in  one  place  as  well  as  in  another.  He  can 
go  North  in  the  summer  or  South  in  the  winter ;  to 
the  mountains  or  the  seashore.  Wherever  he  goes 
he  carries  all  the  elements  of  success  with  him. 
They  are  all  within  him,not  in  the  environment. 
Likewise  the  field  man's  movements  throughout 
the  day,  and  hour  by  hour,  are  under  his  own  con- 
trol. They  are  not  the  result  of  others'  dictation 
and  judgment. 

Another  advantage  presented  by  the  life  insur- 
ance profession,  and  one  which  should  appeal 
strongly  to  you,  is  this :  You  not  only  earn  a  good 
compensation  in  the  present,  but  you  may  build 
up  an  income  for  the  future.  To  those  of  you  who 
are  not  familiar  with  the  practical  work  of  Hfe 
insurance  in  the  field,  let  me  explain. 

When  the  first  premium  is  paid,  it  is  collected 
by  the  agent.  The  company  gives  him  a  portion 
of  that  as  a  commission — let  us  assume  50  per 
cent.  When  he  collects  an  $100  premium  he  re- 
ceives $50  as  commission.  I  maintain  that  on  the 
basis  of  the  first  year's  commission  alone  this 
gives  as  large  returns  as  any  other  business  in 
the  world.  Let  us  assume  that  these  policies  will 
be  on  the  books  for  twenty  years  and  that  nine- 
teen other  such  payments  will  be  made.  When 
the  second  and  subsequent  payments  are  made, 
there  will  be  paid  to  the  agent  a  renewal  commis- 
sion— let  us  say,  7  per  cent.  All  companies  pay 
not  only  a  commission  in  the  first  year,  but  a  re- 
newal commission  in  the  subsequent  years  of  in- 
surance. As  a  matter  of  fact,  the  great  majority 
of  life  insurance  men  are  not  working  for  com- 
panies at  all,  but  for  other  agents;  and  in  that 
case  renewal  commissions  depend  upon  their  con- 
tract of  service  with  the  agent.  A  general  agent 
often  gives  a  portion  of  the  renewal  commissions 
to  his  sub-agents. 


Assume  that  you  are  fortunate  enough  to  have 
a  renewal  commission  contract.  After  you  have 
secured  $100,000  in  premiums,  which  are  paid 
annually  to  the  company,  you  are  in  the  position 
of  a  capitalist  who  is  loaning  out  $100,000  and 
getting  7  per  cent,  and  on  this  you  pay  no  taxes  or 
charges. 

In  this  country  we  hear  little  about  incomes  and 
annuities,  which  are  common  in  England.  In 
this  country  men,  instead  of  building  up  incomes, 
use  their  capital  and  hope  to  replace  it  by  fortu- 
nate investments.  The  sad  truth  remains  that 
nine  out  of  every  ten  men  cross  the  dead  line  of 
old  age,  just  about  as  poor  as  when  they  started 
the  struggle  of  life,  doomed  to  be  dependent  upon 
others.  The  life  insurance  field  man  with  a  re- 
newal contract  need  not  have  that  experience. 
Young  men,  let  me  urge  you  to  get  a  renewal  con- 
tract direct  from  a  company,  in  order  that  you 
may  feel  when  you  write  your  first  application, 
that  you  have  started  the  building  up  of  an  income 
to  take  care  of  the  future. 

Further,  this  business  does  not  require  the  use 
of  capital.  Now,  there  may  be  young  men  in  this 
room  ambitious  to  go  into  the  mercantile  business. 
You  cannot  do  it  without  capital.  You  may  want 
to  engage  in  manufacturing.  You  cannot  do  it 
without  capital.  In  this  business  you  do  not  re- 
quire capital,  as  ordinarily  understood.  The  capi- 
tal that  you  require  is  initiative,  industry,  energy, 
patience,  and  a  tremendous  enthusiasm  for  your 
work. 

Now  ready  for  life  insurance  field  work,  where 
will  you  go?  This  is  an  intensely  practical 
question  that  will  confront  you.  You  may 
safely  ally  yourself  with  any  one  of  the 
legal  reserve  companies.  All  want  your  ser- 
vices,    and     all     will     treat     you     well.     You 

10 


will  have  to  decide  according  to  your  own 
ideas.  What  one  would  I  suggest  ?  I  would  ally 
myself  with  a  young  and  growing  company  for 
this  reason:  Companies  having  a  rapid  growth 
and  development  will  make  room  for  many  men. 
The  small  company  with  growth  and  development 
before  it,  offers  better  opportunity  than  can  possi- 
bly be  the  case  with  companies  whose  develop- 
ment has  already  covered  the  United  States,  and 
in  some  cases  the  entire  civilized  world.  In  other 
words,  the  young  and  small  company  needs  you 
more  than  does  the  older  and  larger  one,  where 
there  are  ten  men  standing  in  line  for  every  good 
place. 

Furthermore,  you  will  come  into  closer  touch 
with  the  purposes,  plans,  and  ideals  of  the  small 
company,  than  you  can  possibly  ever  do  with  a 
larger  one.  You  will  be  relatively  a  larger  factor 
in  it ;  in  a  larger  measure  it  will  be  yours  to  think, 
to  plan,  and  to  execute.  You  want  to  be  as  potent  a 
factor  as  possible  in  the  great  business  in  which 
you  are  engaged,  and  not  one  of  thousands  who 
are  hewers  of  wood  and  drawers  of  water.  As  a 
political  ambition,  it  is  better  to  be  one  of  the 
council  of  a  little  city,  actually  shaping  and  mold- 
ing civic  life,  than  to  be  one  of  eight  thousand  dis- 
tant relatives  of  Thomas  Jefferson. 

Men  do  not  do  their  best  work  for  money 
alone.  The  young  man  cannot  work  in  that  spirit. 
To  do  his  best  w^ork  he  must  not  only  be 
alive  with  energy,  but  aglow  with  enthusiasm. 
This  is  the  magnificent  period  of  life — Youth. 
Youth  and  opportunity  combined — these  are  to- 
day your  priceless  possessions.  It  was  with  this 
thought  that  the  preacher  said,  "Rejoice,  O  young 
man,  in  thy  youth."  He  realized  that  in  the  morn- 
ing of  life  were  found  the  fresh  dews  of  enthus- 
iasm and  inspiration.     "Your  young  men  shall 

11 


see  visions,  and  your  old  men  shall  dream 
dreams."  Why  do  young  men  see  visions  while 
the  old  men  dream?  It  is  because  dreams  have 
to  do  with  the  past.  In  memory  and  imagination 
the  old  man  lives  over  again  the  great  achieve- 
ments of  a  former  time.  But  visions  have  to  do 
with  the  future,  and  so  visions  are  for  the  young 
men.    Vision  is  revelation. 

Life  insurance  is  but  in  its  infancy.  Greater 
things  are  being  done  today  than  ever  before,  and 
the  future  will  bring  still  greater  things !  There 
may  be  in  this  room  another  Hyde,  mighty  mas- 
ter-builder of  the  Equitable.  There  may  be  a  Bat- 
terson,  great  founder  of  the  Travelers.  Heroic 
figures  of  a  former  time — God  rest  their  great 
souls.  There  may  be  here  a  Hegeman  or  a  Mc- 
Call. 

Remember  that  the  great  men  in  life  are  not 
those  who  rest  in  the  protection  and  service  of 
great  institutions,  but  those  who  built  those  insti- 
tutions into  greatness.  Many  serve  in  a  temple 
which  others  have  built  and  consecrated;  they 
hold  a  fortress  which  others  have  first  made  im- 
pregnable. 

May  it  be  yours,  in  as  large  a  measure  as  possi- 
ble, to  be  something  and  do  something  in  the 
building  up  of  life  insurance.  May  yours  be  the 
profit  of  growth;  and  may  yours  be  the  joy  and 
inspiration  of  growth.  And  so  as  old  men  may 
it  be  yours  to  dream  of  a  glorious  past  in  which 
stands  some  mighty  structure  which  you  have 
helped  to  build. 


12 


W.LU  BE  *SS=«!.^°   Xe  DUE    THE  PENAUTV 
THIS   BOOK  °N  "f  "'■JInTS  ON  THE  FOURTH 

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